Markets up smartly on the heels of Bernanke’s speech last night. The panic had become palpable, leading to dovish comments from Bernanke and Kohn. Thus, as we discussed on Monday and Tuesday, the Christmas Rally has finally arrived. (Kudos to Guy Ortmann, Howard Lindzon, and Mike Panzner, who all pretty much nailed this one)
You should read Bernanke’s full speech (here), but the money quote is below:
"The incoming data on economic activity and prices will help to shape the
Committee’s outlook for the economy; however, the outlook has also been
importantly affected over the past month by renewed turbulence in financial
markets, which has partially reversed the improvement that occurred in September
and October. Investors have focused on continued credit losses and write-downs
across a number of financial institutions, prompted in many cases by
credit-rating agencies’ downgrades of securities backed by residential
mortgages. The fresh wave of investor concern has contributed in recent weeks to
a decline in equity values, a widening of risk spreads for many credit products
(not only those related to housing), and increased short-term funding pressures.
These developments have resulted in a further tightening in financial
conditions, which has the potential to impose additional restraint on activity
in housing markets and in other credit-sensitive sectors. Needless to say, the
Federal Reserve is following the evolution of financial conditions carefully,
with particular attention to the question of how strains in financial markets
might affect the broader economy."
Careful out there. We may get snow this weekend!
>
Source:
National and regional economic overview
At the presentation of the Charlotte Chamber of Commerce, NC
Board of Governors of Federal Reserve, November 29, 2007
http://www.federalreserve.gov/newsevents/speech/bernanke20071129a.htm
translated to mean:
“we cannot allow markets to actually go down since our entire banking system is set-up to realize appreciating asset flow.”
“we have no idea how to fix this but we are going to lower rates until we think it will make a difference”
Said the blind Man in a speech…
Ciao
MS
“Investors have focused on continued credit losses and write-downs across a number of financial institutions, prompted in many cases by credit-rating agencies’ downgrades of securities backed by residential mortgages.”
Funny quote! Do you read it as I do as a warning to credit agencies that they might make things worth by finally trying to tell us the truth?…
You guys seriously didn’t expect j6p’s November 401k contributions to buy in at the 10% discount, likely this will all get fixed next week.
What serious path do we have to complain about Bernanke the Least’s ignorant ramblings?
The credit agency downgrades aren’t the issue.. it’s the fact that his buddies wrote trillions of dollars of bad loans. Liquidity isn’t the solution to insolvency, Ben.. that may not be an econ 101 subject, but it’s certainly econ 102 material.
This man is nothing but a liar, and I truly hope history judges both him and Paulson as equally deserving of Greenspan’s legacy of buffoonery.
Just keep pushing that string, Benny Boy. I shook my head when the markets went up almost 400 points on what Reuters termed “hope” that the Fed would cut rates. I was reminded of what novelist Harry Crews liked to say about hope, “Let one hand fill with hope and the other hand fill with **** and see which hand fills up most.”
Another hundred points on the Bernanke put comments. Fire up the helicopter!
With 4.9% growth, why should rates be cut?
Oh that’s right. They have the real numbers.
The recent talk might just put the “kingpins” in a bind.
The financials have led the way as of late, but less than five trading sessions ago they were in the tank.
1) Tank = we need help
2) Rally = the worst has past
There are still six trading sessions left before the next FOMC feast. If the financials hold up, the overindulgent may very well use that as an excuse for a 25 bip cut. Meanwhile, their Treasury brothers get deals with the subprime lenders in the next few days, and the guys on the other side of the table demanding 50 bips get sorely disappointed.
In essence, the worst hurt sectors need to be in the toilet, and right now they are not.
>>In essence, the worst hurt sectors need to be in the toilet, and right now they are not.>>
I can’t help but agree however I do not see how it has mattered in the past.
Until the banks and brokers identify this for what it really is, a solvency issue and not a credit issue, then we will continue to be “surprised” and “shocked” as to why they keep writing assets down.
Ciao
MS
What a magnificent stylist he was!
I can’t get it out of my head.
“The Girl from Ip-a-ne-ma da da da, da—
Da—da, da da,da, Da—da, da da, da..”
http://www.youtube.com/watch?v=IWncdiAt5M4
—
BTW, the word is Ombudsman!… N-A-T-I-O-N-A-L and N-o-w!
http://www.google.com/search?hl=en&q=florida+local+government+fund&btnG=Google+Search
Dr. Benber N. Anke can not solve the problem with just central bank policy. Are you listening Congress?… Are you listening White House?
Even the Governator is ahead of you in planning and thinking, and i-n-s-t-a-l-l-i-n-g a mechanism, albeit limited in scope and particularly organized for California only:
http://www.bizjournals.com/eastbay/stories/2007/11/19/daily23.html
… although supported by an initial proposal from Sheila Bair at FDIC. Atta girl, Sheila!
Wake up Administration and Congress!… Wake UP!
Are you just going to sit on your hands and watch a helter-skelter hodgepodge of random states and governors cobble together plans of their own?…plans that might just cause a reckless nationwide form of adverse arbitraging?
Paulson’s potential dealing is worthy, but at best only a temporary stop-gap. If the housing situation worsens considerably more, you’d better have a formal mechanism and its appointed ombudsman in place before it does.
http://www.msnbc.msn.com/id/22039594/
The “stresses” Bernanke speaks about are b-e-y-o-n-d the Fed’s capacity to assuage.
I think we might all get snowed this weekend:
http://blogs.wsj.com/marketbeat/2007/11/30/we-are-all-subprime-borrowers-now/
“The Treasury Secretary is reportedly brokering a plan that would have lenders maintain lower introductory rates for borrowers for a number of years, in effect making those adjustable rates into fixed rates.”
Investors?
What is the fed thinking about or commenting on investors for?!
I thought the fed’s one and only job was to keep the banking system(cartel) solvent? Anything else was supposed to be left to the free market.
Investors!! INDEED!!
Barry,
Alan “Bubble Man” Greenspan and Bubble Boy Bernanke, the Dynamic Duel of Gotham City, together with the Man of Steel Kudlow and Wounder Boy Jim Cramer will leap tall buildings of debt and flying faster then the falling dollar, will lead us to the promised land land of goldilocks. Barry, “Don’t Fight the Fed.” Whose motto is “money for nothing and rates for free”. Just let it happen, Dont worry be happy!
“Happy are they that hear their detractions, and can put them to mending”
William Shakespeare
Barry,
Jellybeans in a jar. This whole repackaging of loans in to SIV, CDO, CLO, or whatever is analagous to a jar of Jelly beans with good and bad mixed in. Since you “packaged” them together you have no way to separate them (Mr. Smith’s loan v. Mr. Jone’s). Nobody wants to by a jar of jellybeanns if some are guaranteed to be bad but you have no way to tell which. Rate cuts ain’t gonna help this problem one bit.
“Jellybeans in a jar”
That is the best analogy that I have yet heard for the SIV, CDO et al ness. Keep ’em coming.